Originally published on November 23 on my blog for Inside Housing
Wednesday’s Autumn Statement by Philip Hammond is good news for housing on several different fronts.
First, at long last housing is being recognised as infrastructure. That’s important enough in itself but Mr Hammond went even further by pitching housing as part of the solution to the key economic problem of productivity.
Along with transport, digital communications and research and development, housing will be part of the chancellor’s £23bn National Productivity Investment Fund. In financial terms, accelerated construction, affordable housing and the new Housing Infrastructure Fund represent a third of the total cost.
Mr Hammond also named “the housing challenge” alongside the productivity gap and the imbalance in prosperity across the country as one of the economy’s long-term weaknesses.
What would it mean if George Osborne succeeds in cutting public spending to its lowest level since the 1930s?
The scale of the cuts for the rest of this decade implied by the deficit reduction targets in the Autumn Statement takes us into territory uncharted since the war. Many people believe Osborne has moved from the realms of the unlikely to the realms of fantasy and it’s not hard to see why. If the chancellor missed the deficit targets he set out in 2010 by a wide margin, why should we accept what he says in 2014? Especially when he says he can cut taxes at the same time.
Osborne must have hoped that all the headlines would be about stamp duty reform. Instead, news coverage has instead been dominated by the Office for Budget Responsibility’s projections of what further austerity would mean for the public sector. This graph on government consumption as a proportion of GDP sums it up:
17:00 The independent Office for Budget Responsibility has issued yet another update to its estimate of the size of the housing benefit bill. It says housing benefit will cost £6 billion more over the next five years than it estimated at the time of the Budget in March. It puts the cost at £600 million more in 2013/14, rising to £1.8 billion more by 2017/18. According to the OBR’s Economic and Fiscal Outlook:
‘About half of this is explained by an increase in the proportion of employed people who receive housing benefit, based on recent data and detailed modelling, which suggests that growth in renting for this part of the working age population is likely to continue to increase further over the forecast period. Changes in the caseloads for other benefits, particularly ESA, explain the majority of the remaining increase.’
This is the third time in a year that the OBR has increased its estimate of the cost of housing benefit. The March estimate was itself £3.7 billion higher over five years than the one it gave in last year’s autumn statement, and that one was £2.8 billion higher than the one at the March 2012 Budget.
What happens next? Though the OBR’s updated cost estimates seem to grow bigger every six months, the Treasury is determined to cap ‘the vast majority’ of housing benefit spending as part of its overall welfare cap. Those rising in-work claims are the result of low wages and high rents, yet only ‘cyclical’ spending like JSA-related housing benefit will be exempted from the cap. Yet more housing benefit cuts to come?